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Dallas - The organization that created the Medical Savings Account concept now says the MSA pilot project is proving to be a failure. The reason: over-regulation.

"Congress has imposed more regulations on MSAs than any other type of health insurance," said John Goodman, president of the National Center for Policy Analysis. "MSAs were intended to empower patients, but too many members of Congress don't trust patients to make their own decisions."

A federal pilot program that took effect in 1997 allows up to 750,000 households to select high-deductible insurance and make deposits to tax-free accounts from which they can pay small medical bills. The program is limited to the self-employed and employees of small businesses.

But a year-and-a-half into the pilot program, only about 100,000 accounts have been established - far fewer than what proponents were expecting. In a study just released by the NCPA, health economist Greg Scandlen says the growth of MSAs has been hampered by restrictions.

Among the problems:

Major insurers are reluctant to enter so small a market since its size does not warrant the marketing of a new product the way Roth IRAs have been marketed.

Under current law, MSA plan deductibles cannot be lower than $1,500 for individual policies and $3,000 for families. These deductibles are intimidating to many middle-income Americans.

MSA tax-free deposits are limited to 65 percent of the individual deductible and 75 percent of the family deductible, leaving a gap that could expose people to significant out-of-pocket expenditures.

"Congress opened the window of health insurance for small businesses and the self-employed, but then slammed it shut with regulation," Goodman said.